217
After the closing entries are posted to the accounts, the inventory account will be updated to reflect
the actual amount of inventory on hand, $22,856.
The final step of the closing
entry process is to close the
income summary account to
the owners’ capital account.
The journal entry on January
31 is shown in Figure 7A.20.
The T-accounts in Figure
7A.21 below summarize
the closing entries under
the periodic inventory system. Note how the inventory account is updated following the physical
inventory count. Each item that is closed to the income summary account is shown separately so
the opening and ending inventory amounts can be highlighted.
INCOME SUMMARY
+
INVENTORY
SANDERS, CAPITAL
20,000
22,856
360
84
20,000
2,940
Revenue
Ending Inventory
Purchase Returns
& Allowances
Purchase Discounts
Remove
beginning
inventory
Add
ending
inventory
20,000
4,300
250
14,200
100
1,510
20,000
22,856
22,856
Opening Inventory
Sales Returns
& Allowances
Sales Discounts
Purchases
Freight-in
Operating Expenses
Bal. 2,940
2,940
Close Income Summary and
update Owner’s Capital
FIGURE 7A.21
+
-
+
-
-
_______________
fIGuRe 7A.21
Journal
Page 1
date
account title and explanation
debit Credit
2016
Dec 31 Income Summary
2,940
Sanders, Capital
2,940
To close income summary account
_______________
fIGuRe 7A.20
Inventory: Merchandising Transactions
Chapter 7 Appendix
